Photovoltaic power production capacity continues to grow at a significant rate in part due to a growing demand for renewable energy resources in the United States and abroad. Distributed photovoltaic systems that operate independently from and centralized photovoltaic systems that operate adjunctively to traditional centralized power generation facilities have both contributed to this growth in capacity, although a substantial portion of the capacity growth can be directly attributed to the efforts of private individuals and businesses that are installing distributed photovoltaic systems to satisfy their own power demands off-grid.
Grid connection of distributed photovoltaic power production fleets is a fairly recent development, beginning with the Energy Policy Act of 1992, which deregulated power utilities and mandated the opening of access to power grids by outsiders. Power grid operators are still adapting to this change. Under the traditional pre-1992 grid power generation model, a power grid functioned as a centrally-located monotonic electricity generation, transmission, and distribution infrastructure that unidirectionally delivered power from suppliers to consumers. Today, however, operators of distributed photovoltaic systems are not wholly dependent upon power grid-supplied electric utilities. As a result, at least in the United States, these utilities have adopted the practice of using net metering to compensate their customers for private photovoltaic power production. Under net metering, private photovoltaic system operators typically receive a retail credit for at least a portion of the electricity that they generate, but do not directly consume, in exchange for the excess electricity provided to the power grid. However, while readily calculable, net metering does not scale in proportion to expected growth in photovoltaic production and fails to present a sustainable long-term solution to compensating customers for private off-grid photovoltaic power production.
Value of Solar (VOS) analysis provides an alternative approach to net metering for compensating customers for their private photovoltaic power production. VOS analysis is based on an assessment of the value of distributed photovoltaic production that is expected to be realized by the utility over the long term. However, there is an inherent tension between the value realized versus the cost of generating electric power. Value increases with proximity to consumption because losses are minimized, delivery costs are reduced, and other benefits are realized. On the other hand, cost decreases with distance away from consumption because power generation can take advantage of the economies of scale by being concentrated in one location. As a result, value realized is highest for distributed (on-site to customer) photovoltaic power production, while cost of generating electric power is lowest for centralized (off-site from customer) power generation.
To date, VOS analysis has not been well-defined. Effective VOS evaluation requires time- and location-specific photovoltaic power production data that correlates to utility power generation particulars. The photovoltaic modeling to produce such high-quality solar resource power production data has historically been difficult to obtain. As well, the nature of the problem of accurately assessing the value components of the VOS analysis requires expertise from diverse disciplines that include distribution planning, generation planning, regional renewable energy markets, and engineering economics. As a result, outside expertise and costly consulting engagements are necessary to develop VOS analysis methodologies, encode spreadsheet models, form consensus within the different internal utility organizations, and write reports.
Therefore, a need remains for an approach to assessing the long-term value of photovoltaic power production, particularly when distributed.